Bloomberg News

U.S. Stocks Gain on Economy as Euro Rebounds on Greece Optimism

February 21, 2012

Feb. 16 (Bloomberg) -- Stocks rose, sending the Standard & Poor’s 500 Index near the highest level in three years, as better-than-estimated data on American jobless claims, housing starts and manufacturing bolstered optimism in the economy. The euro rose amid optimism Greece will receive a second bailout.

The S&P 500 advanced 1.1 percent to close at 1,358.04 at 4 p.m. in New York. The Stoxx Europe 600 Index ended little changed after tumbling as much as 1.1 percent. The euro was up 0.6 percent at $1.3141 after dipping below $1.30 earlier for the first time since Jan. 25. Ten-year Treasury yields added five basis points to 1.98 percent. The S&P GSCI gauge of 24 materials increased 0.5 percent as oil rose to a six-week high.

U.S. stocks reversed a global slump as jobless claims slid to a four-year low while housing starts and the Federal Reserve Bank of Philadelphia’s economic index topped forecasts. Banks rebounded as European governments considered cutting rates on emergency loans to Greece and using contributions from the European Central Bank to plug a new financing gap in the second bailout for Athens, two people familiar with the talks said.

“U.S. economic numbers have been much better than expected,” said Liz Ann Sonders, the New York-based chief investment strategist at Charles Schwab Corp., said in a telephone interview. Her firm has $1.68 trillion in client assets. “I’m pretty optimistic, but I don’t think we’re going to boom. The debt overhang puts a lid on how fast the U.S. economy can grow.”

Dow Leaders

The S&P 500 closed less than 0.5 percent below its peak nine months ago of 1,363.61, which was the highest level since June 2008. Bank of America Corp., Microsoft Corp. and Hewlett- Packard Co. climbed at least 2.6 percent for the biggest gains in the Dow Jones Industrial Average, which advanced 123.13 points, or 1 percent, to 12,904.08. All 10 of the main industry groups in the S&P 500 advanced, led by commodity producers, financial firms and technology companies.

General Motors Co. rallied 9 percent after posting full- year earnings of $9.19 billion, the largest profit in its 103- year history. Apple Inc., the biggest company by market value, rose 0.9 percent after yesterday falling for the first time in nine days.

Applications for jobless benefits decreased by 13,000 last week to 348,000, less than the lowest forecast in a Bloomberg survey of economists and the fewest since March 2008. The Philadelphia Fed’s general economic index increased to 10.2, topping the median economist forecast for a reading of 9. Housing starts increased 1.5 percent to a 699,000 annual rate and building permits increased. The Bloomberg Consumer Comfort Index increased to the highest level in a year. have had terrible consequences.”

Commodities

Natural gas surged 5.9 percent, leading gains in commodities, after a government report showed a bigger-than- forecast drop in U.S. inventories. Oil for March delivery gained 51 cents to $102.31 a barrel. Seventeen of the 24 commodities tracked by the S&P GSCI index advanced.

The euro rose against 12 of 16 major peers. Three euro-area officials said the European Central Bank is swapping its Greek bonds for new ones to ensure it isn’t forced to take losses in a debt restructuring. The ECB is exchanging its Greek debt for bonds of an identical structure and nominal value, with the only difference being that they would be exempt from so-called collective action clauses, the officials said on condition of anonymity. One said the bonds have a face value of about 50 billion euros.

European Stocks

About three shares declined for every two that rose in the Stoxx Europe 600 Index. Spanish banks slid as regulators lifted a six-month ban on short-selling the nation’s lenders. Banco Santander SA lost 2.6 percent. Banco Bilbao Vizcaya Argentaria SA and Bankia SA retreated more than 4 percent.

Ratings for UBS AG, Credit Suisse Group AG and Morgan Stanley may be lowered by as many as three levels, while those for Goldman Sachs Group Inc., Deutsche Bank AG, JPMorgan Chase & Co. and Citigroup Inc. may be cut two levels, Moody’s said in a statement.

Italian 10-year bond yields decreased eight basis points to 5.66 percent and Spain’s yield lost 11 basis points to 5.33 percent. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments halted a six-day advance, slipping 2.4 basis points to 342.5.

Yield Spread

The difference in yield investors demand to own Spain’s 10- year bonds compared with Germany benchmark bunds decreased 14 basis points after rising earlier. Spain sold 4.07 billion euros of debt maturing in 2015 and 2019, more than the 4 billion-euro maximum target. The yield spread between French bonds and the bund decreased 5.8 basis points. France sold 8.45 billion euros of debt at lower borrowing costs.

The MSCI Emerging Markets Index fell 0.5 percent, erasing about half of yesterday’s gain. Taiwan’s Taiex index and South Korea’s Kospi Index lost at least 1.4 percent. Catcher Technology Co. and Foxconn Technology Co., which make casings for Apple Inc.’s iPhones, slumped more than 6 percent in Taipei after Apple shares lost 2.3 percent yesterday. The Shanghai Composite Index retreated 0.4 percent.

--With assistance from Claudia Carpenter, Paul Dobson, Abigail Moses, Andrew Rummer and Jason Webb in London, Jonathan Burgos in Singapore and Jeff Black in Frankfurt. Editors: Michael P. Regan, Jeff Sutherland

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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